माइक्रोसॉफ्ट पर ₹1.4 करोड़ की MVAT ब्याज मांग को बॉम्बे उच्च न्यायालय ने रद्द किया

Levy Of Interest Dehors Statutory Provisions Is Constitutionally Impermissible: Bombay High Court Quashes ₹1.4 Crore MVAT Interest Demand Against Microsoft India

The Court noted the tax planning within the framework of law cannot be read down as “unjust enrichment”.

The Bombay High Court has held that the levy of interest outside the strict boundaries of statutory provisions is constitutionally impermissible under Article 265 of the Constitution of India. Quashing interest demands of over ₹1.40 crore against tech giant Microsoft Corporation (India) Pvt. Ltd., the Bench noted that where a dealer remits tax strictly within the timelines prescribed by statutory rules, tax authorities cannot create or impose an interest liability based on administrative perceptions of "unjust enrichment".

Setting aside an appellate order under the MVAT Act and Central Sales Tax Act, 1956 (CST Act), the Bench clarified that paying tax within legally prescribed due dates cannot be branded as an impermissible "colorable device" or "deferment" merely because the taxpayer experienced substantial turnover growth during the financial year.

A Bench comprising Justice M. S. Karnik and Justice Sandesh D. Patil observed, “…this is a fit case where levy of interest is dehors the statutory provisions and therefore is constitutionally impermissible and in violation of Article 265 of the Constitution of India. The interest is a fiscal levy and can be imposed only with the authority of law. The interest is a fiscal levy and can be imposed only with the authority of law”.

“The reasoning in the impugned orders that the petitioner derived an “unwarranted benefit” or stood “unjustly enriched” by paying tax on a six monthly basis, in our opinion, is not correct. The MVAT Act does not create any concept of unjust enrichment in relation to return periodicity or timing of tax payment where the dealer has acted strictly in accordance with the prescribed Rules. In the facts of the present case, payment of tax within the legally prescribed due date cannot be characterised as deferment or enrichment merely because the turnover during the relevant year was substantial”, it noted.

Advocate Prasad Paranjape appeared for the petitioner and Jyoti Chavan, Additional. G.P. appeared for the respondent.

The petitioner, Microsoft Corporation (India) Pvt. Ltd., obtained voluntary registration under the Maharashtra Value Added Tax Act, 2002 (MVAT Act) and the Central Sales Tax Act, 1956 (CST Act) with effect from September 3, 2012. In its first year of operation (FY 2012–13), its total tax liability was ₹19,200/-, well below the ₹1,00,000/- statutory threshold prescribed under Rule 17(4) read with Rule 41 of the MVAT Rules, 2005. Consequentially, Microsoft became legally entitled to file returns and deposit taxes on a six-monthly basis for FY 2013–14.

During FY 2013–14, Microsoft's business scaled rapidly, generating a taxable turnover of approximately ₹981 crores and a tax remittance of around ₹41.35 crores under MVAT and CST. Microsoft discharged its entire tax liability within the due dates prescribed for six-monthly returns.

However, during appellate assessment, the Department issued a show-cause notice proposing to levy interest under Section 30(2) of the MVAT Act to the tune of ₹1.26 crore under MVAT and ₹14.06 lakh under CST. The appellate authority held that relying on previous year turnover rules was "hyper-technical" and that Microsoft had "unjustly enriched itself" by deferring tax payments for up to 160 days in certain months instead of remitting taxes on a monthly basis.

Arguing before the High Court, the Department invoked the Supreme Court's landmark ruling in McDowell and Company Limited v. Commercial Tax Officer(1985) 3 SCC 543, contending that Microsoft had used the Voluntary Registration Scheme as a "manufactured colorable device" to secure six-monthly return benefits and withhold government revenue. Microsoft submitted that it had strictly complied with statutory rules governing periodicity, and that interest could not be levied when tax was paid within the time specified by law.

The Bench observed that the appellate authority had virtually "read down" delegated legislation and substituted its own administrative perception of trade practices over unambiguous statutory rules.

The Court observed that tax planning within the framework of law is entirely permissible, distinguishing it from dubious methods or subterfuges aimed at evading tax altogether.

Cause Title: Microsoft Corporation (India) Pvt. Ltd. v. The State of Maharashtra & Ors. (Neutral Citation: 2026:BHC-OS:20201-DB)

Appearances:

Petitioner: Prasad Paranjape, instructed by Lumiere Law Partners.

Respondent: Jyoti Chavan (Addl. G.P.), Himanshu Takke (AGP).

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